Preparing for the Worst Has its Advantages

When you use your smartphone or drive your electric car, you most likely don’t think about what powers it... what makes it totally functional. Those are just two consumer products that use rare earth elements to power them. Military jet engines, satellites, and lasers also require rare earth elements to bring them the power they need to run and operate efficiently.

You probably don’t give any thought to the products you use every day that require rare earth elements, but that’s okay (for now) — most people don’t. However, it’s time you start thinking about what powers the products and devices you depend on the most, especially at a time when tensions between the U.S. and China continue to rise.

China supplied 80% of the rare earths imported by the U.S. from 2014 to 2017. According to research firm Adamas Intelligence, China is home to at least 85% of the world’s capacity to process rare earth ores into material manufacturers can use.

It would take years to get to where China is right now. It would be nearly impossible to build enough processing plants to match China’s processing capacity of 220,000 tonnes — five times the combined capacity of the rest of the world!

The government depends on rare earths for military equipment like jet engines, missile guidance systems, missile defense systems, and satellites. Can a government really be effective without these items on its side?

The answer is no. The government needs these technologies to ensure the nation’s security. Without them, who knows what could happen? Our defenses would be down, and an attack on the nation could easily happen. And that's a really scary thought.

There are many companies crucial to the U.S. economy that could be affected by the lack of rare earths — companies like Raytheon, Lockheed Martin, BAE Systems, and Apple. All of these companies depend on rare earths in some way to create their products.

The U.S. imported $160 million worth of rare earth compounds and metals in 2018, up 17% from 2017. Without a doubt there’s a need for them, and the U.S. will need to start figuring out ways to fulfill that need as tensions with China rise.

Where the U.S. Stands Now

In June, the U.S. Commerce Department urgently recommended that the U.S. start to take steps toward boosting domestic rare earth production. The department warned that a decrease or altogether stop of supplies could disrupt the global supply chains.

As of right now, the U.S. government has exempted rare earths from tariffs on Chinese goods. But the increased tensions between the U.S. and China could have an effect on the price of rare earth metals.

While prices have been steady in the past few months, export prices of rare earth metals have rallied strongly since China’s president, Xi Jinping, visited a rare earth processing firm in southern China at the end of May.

Forecasts show that the rare earth metals segment dominated the market in 2018 and is expected to grow over the next few years because of rising applications and growing demand from various industries.

The Asia-Pacific region dominates the market across the globe. It is responsible for the increasing production of rare earth metals because of the rising demand from electronic and automotive devices.

Harness the Power of Rare Earths

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It contains full details on how you should be investing in rare earths.

Being on not-so-good terms with China is going to affect not just the U.S. but also the entire globe, and that needs to be changed. There needs to be another location for the production of rare earth metals so the entire world isn’t depending on one region, especially one that isn’t entirely an ally at the moment.

At the moment, a resolution seems far away. But a solution isn’t. There is a mining company that isn’t based in Asia and that has the ability to provide the world with its rare earth metals production.

You Need to Know This Mining Company and its Story

As I mentioned earlier, the U.S.-China trade war could become extremely detrimental to the U.S. and the rest of the world. Essentially, Trump has declared economic war on China, and China’s latest plan and rebuttal could hit the U.S. where it hurts and have a significant effect on the U.S.’s global power.

But in the next few months, all of this could be reversed. There might be some reason to start being optimistic about the future.

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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